Question

Coronado Industries purchased a new machine on May 1, 2012 for $547200. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $30000. The company has recorded monthly depreciation using the straight-line method. On March 1, 2021, the machine was sold for $81600. What should be the loss recognized from the sale of the machine?

Answer 1

Cost of machine = $547,200

Salvage value = $30,000

Estimated useful life = 10 years

Annual depreciation expense = (Cost of machine -Salvage value)/Estimated useful life

= (547,200-30,000)/10

= $51,720

Depreciation expense for the year 2012 = Annual depreciation expense x 8/12

= 51,720 x 8/12

= $34,480

Depreciation expense from 2013 to 2020 = Annual depreciation expense x 8

= 51,720 x 8

= $413,760

Depreciation expense for 2021 = Annual depreciation expense x 2/12

= 51,720 x 2/12

= $8,620

Accumulated depreciation upto March 1, 2021 = Depreciation expense for the year 2012 + Depreciation expense from 2013 to 2020 + Depreciation expense for 2021

= 34,480+ 413,760+8,620

= $456,860

Book value of machine at March 1, 2021 = Cost of machine- Accumulated depreciation upto March 1, 2021

= 547,200-456,860

= $90,340

Sale price of machine = $81,600

Loss on sale of machine = Book value of machine at March 1, 2021 - Sale price of machine

= 90,340-81,600

= $8,740

Kindly comment if you need further assistance.

Thanks‼!